Many people feel as though trusts are only useful for the wealthiest people. It is true that high net worth families do benefit from certain types of trusts, largely because they can be exposed to the estate tax. The federal estate tax is potentially applicable on asset transfers that exceed $5.43 million.
We can look at these wealth preservation trusts in a different blog post, but in this post, we will look at some of the advantages that trusts can provide for people who are not necessarily multimillionaires.
Revocable Living Trusts
A revocable living trust can be a good alternative to a last will if your estate planning situation is not overly complex. You do not have to worry about losing control of assets in this type of trust, because you can in fact revoke or dissolve it at any time. As the grantor of the trust, you can also act as the trustee, so you have control every step of the way.
To facilitate asset transfers after you are gone, you name a trustee to succeed you, and you name beneficiaries. After your passing, the trustee would follow instructions you leave behind in the trust agreement, and you can include spendthrift protections if you choose to do so. Assets would be distributed in accordance with your wishes after your passing outside of probate.
On the other hand, if you use a will, it would be admitted to probate. The heirs would not be able to receive their inheritances until the process was over, and it can take close to a year, even if there are no particular complications.
Medi-Cal is a need-based government health insurance program that many seniors rely upon, because it will pay for long-term care. Medicare will not pay for long-term care.
Since it is a need-based program, there is a $2000 limit on countable assets. To get yourself within this limit, you could convey assets into an irrevocable Medi-Cal trust. The assets would not be counted by Medi-Cal evaluators, so you could potentially qualify for coverage as you preserve resources for the benefit of loved ones.
Special Needs Planning
Speaking of Medi-Cal, many people with special needs rely on the program for health insurance. If a person with special needs was to come into some money, Medi-Cal eligibility could be forfeited.
To account for this, you could convey assets into a special needs trust if you want to improve a loved one’s quality of life without impacting Medi-Cal eligibility.
Schedule a Consultation
We have touched on a few of the advantages that trusts can provide in this post, but there are others. If you would like to discuss all of your options with a licensed professional, contact us through this page to set up a no obligation consultation: Los Angeles CA Estate Planning Attorneys.